Radio City looks to increase ad rates by 15-20 per cent

The radio station believes it is making the right price and value equation and considers the increased rates to be more relevant to the deliverables offered to advertisers.

Radio City 91.1 FM, promoted by Music Broadcast Private Limited (MBPL), looks to increase its ad rates by 15-20 per cent across markets. The hike is being put into effect in a gradual manner.

In a brief chat with afaqs!, Ashit Kukian, president and chief operating officer, Radio City 91.1 FM, confirms the hike.

"Pricing as a policy is not something we do in one shot and finish off. There are different kinds of deals with the clients. When we look at the beginning of the year and the end, our aim is 15-20 per cent ER (effective rate) increase," says Kukian.

He adds that for the network, this is not a mere price hike without a process and it is only making the rates relevant to the deliverables it provides to its advertisers.

"We are only making the right price-value equation. There are two different perspectives. One can be a position of arrogance - that 'we are getting a lot of advertising, let us increase rates'. The other is clearly telling the client that 'while we are increasing the rate you are paying, your delivery continues to be the same or even more'," Kukian says.

He states that the industry as a whole ought to look at increasing ad rates for better inventory control.

"It is not just us. The radio industry should look to increase ad rates, at least in the prime markets. The medium has established itself and today, by design and choice, radio is a part of major media plans. Obviously, the key markets - the metros - are getting saturated. The price that one is paying right now may be a cheaper rate and hence, it only makes sense for us to increase rates and control the inventory to an extent," he explains.

While the company refused to make public any base rates, media planners estimate it to be in the range of Rs 600-1,100 per 10 seconds. However, the rates vary as they are market-specific and deal-specific.

Justifying the hike, Kukian says that it would reflect on the value that the station provides its advertisers, which is much more than vanilla advertising.

"We have made use of the medium in a very user-friendly format for the advertiser. We have tried and weaved in a lot of content into the advertisers' communication. We offer innovative solutions. There is a lot more involvement and consumer interaction. We have on-ground activation. We try and give maximum returns through all these integrations. It is a far more by-design solution approach that Radio City sees," he says.

In the recent past, MBPL has added Radio City Connect to its offerings. A non-traditional revenue arm of the network, it provides local advertising solutions, delivering a variety of on-ground activities combining radio, activation, events, online and mobile.

With the increased ad rates, commercial time on the station is bound to go down but Kukian is certain that it will be temporary. The radio station has done the math for itself as he says the company knows the threshold pricing that can be worked on without affecting revenues.

Kukian says, "It is a decision you take over a period of time, keeping in mind what kind of threshold ER will not let your inventory fall below 'x' level, so that your revenues are still intact. While we are talking about a rate increase, we are justifying it; whether it is the growth that we are showing, or the deliverables the advertisers are getting. So I am sure, if there is a drop in inventory, it will be momentary."

Currently operating in 20 markets, Radio City is prudent on the markets it chooses to be in. While bullish on further penetration, it is particular that the markets have to be advertising-friendly as it reaches out further in Phase III.

Talking about the national versus local advertising ratio on the station, Kukian puts the figure at 70:30 in favour of large national corporate brands. However, he does not rule out the fact that going forward there will be an increase in the local advertising pie.

"Slowly, the mix is changing. I would not be surprised if this year it goes to 65:35 because locally, we are penetrating far more in the last two years. The markets are getting more mature. The retail industry, which was a little low in the last two years, is slowly picking up. The radio industry's strength lies in the fact that you can localise content and hence, advertisers are looking at local markets. One fine day, you just might see that the local market will have as much investment in the medium as the corporate advertisers," he says.